Ghana: CedisPay forecasts prolonged economic impact of interest rate hikes
According to CedisPay in its report on Ghana’s economic outlook for 2024, Ghana might witness the complete impact of interest rate hikes in 2023 over a more extended period, possibly 24 to 36 months.
Usually, the full effects of interest rate changes typically unfold over 18 to 24 months, affecting various economic channels.
According to CedisPay, the lag in the Bank of Ghana’s monetary policy on the economy indicates that a substantial upturn may not occur until 2025. This lag underscores the difficulty of aligning monetary policy with
economic shifts effectively.
CedisPay asserts that it anticipates a global growth slowdown in 2024 after 2023 was more resilient than anticipated, noting that for borrowers in 2024, the prolonged economic slowdown and potential interest rate hikes could carry significant implications.
“It is crucial for borrowers to adopt prudent financial habits, including responsible debt management, prioritizing essential expenses, and establishing an emergency fund. Maintaining open communication with lenders to explore flexible repayment options becomes paramount,” it stated in its report themed, “Navigating the Aftermath of 2023 Interest Rate Hikes.”
“Lenders, must hence proactively adapt to the evolving economic landscape. Refining risk assessment models, offering flexible repayment plans, and enhancing financial education initiatives for borrowers contribute to resilience in the face of economic uncertainties. Building strategic partnerships and diversifying financial products to meet varying borrower needs are crucial for sustained growth,” it added.
On the subject of inflation, the report notes that inflation has eroded people’s savings, creating a situation where individuals possess the “fuel” in their financial vehicles but are unable to refill. Asserting that, the prolonged economic slowdown may result in a pile-up of debts, forcing individuals to make difficult choices about which debts to prioritize.
Touching on the upcoming elections, CedisPay notes that 2024 being an election year, expectations lean towards increased government spending. The surge in government spending it posits, could lead to a rise in T-bill rates, impacting inflation in various sectors, except for food, which may remain relatively stable.
CedisPay is of the view that navigating Ghana’s economic landscape demands a nuanced understanding of the intricate relationship between global economic shifts, local monetary policies, and election-year dynamics.
